In this issue:
- Pooled Registered Pension Plans
- Extension of Solvency Funding Relief to Additional Public Sector Plans
Pooled Registered Pension Plans
As discussed in a previous Pensions@Gowlings, in November 2011 the federal government introduced legislation (Bill C-25) to implement the federal portion of the Pooled Registered Pension Plan (PRPP) framework (the "PRPP Act"). On March 6, 2012, the House of Commons Standing Committee on Finance completed its review of Bill C-25 and reported it back to the House of Commons without amendment. In December 2011 the federal government released for consultation a package of draft legislative changes to the Income Tax Act and the Income Tax Regulations (the "ITA Amendments") to accommodate PRPPs. The ITA Amendments are to come into force at the same time as the PRPP Act.
Under the ITA Amendments, all PRPP contributions for a year made by and on behalf of a PRPP member will be limited to the member's available Registered Retirement Savings Plan contribution room. Employers will be permitted (but are not required) to make direct contributions to a PRPP in respect of an employee, which will be excluded from compensation for tax purposes i.e., it will be treated like an employer's contribution to a registered pension plan (RPP). Unlike the treatment of RPPs, there will be no "qualified investment" rules. Instead there will be general rules addressing diversification and self-dealing.
The federal government also announced that the Goods and Services Tax/Harmonized Sales Tax (GST/HST) rules under the Excise Tax Act will be amended so that PRPPs will be subject to the same GST/HST treatment as RPPs i.e., as investment plans. The amendments to the Excise Tax Act are intended to be implemented concurrently with the ITA Amendments.
Where a PRPP permits members to make investment decisions and the investment options include securities, prospectus and registration requirements will have to be considered. Securities law exemptions granted in respect of capital accumulation plans (by rule, blanket order, or ad hoc exemptive relief) were based, at least in part, on the premise that the employer would be responsible for selecting investments options, not a service provider. Quaere whether such securities exemptions would be applicable to PRPPs.
Consideration also should be given to whether the Guidelines for Capital Accumulation Plans (issued by the Joint Forum of Financial Market Regulators) (the "CAP Guidelines") would apply. If applicable, the CAP Guidelines could be seen to impose some continuing obligations (e.g. monitoring the PRPP administrator) on an employer who offers a PRPP to its employees. Although the PRPP Act contemplates that the administrator can select investment options, the CAP Guidelines state that the CAP sponsor (usually the employer) should select the investment options.
Extension of Solvency Funding Relief to Additional Public Sector Plans
On February 16, 2012, Ontario Regulation 12/12 made under the Pension Benefits Act came into force. This regulation adds seven pension plans to the schedule of public sector plans that are eligible for temporary solvency funding relief that was introduced in 2011 by Ontario Regulation 178/11.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
